DENVER | Main Development Thread #7

[laniroj]

Originally Posted by TakeFive

...But you also complained about the high cost of construction; that applies also to fourplexes, likely even worse. So forget about attaining any significant degree of affordability but is four units better than one? Sure, where you can find something that can at least pencil at strong rents. May I suggest that won't be as easy as you think?...

I mean really, seriously

Can you see bunt being his own general contractor? He'd probably be out there with a slide rule trying to figure out why there's water bubbling up in various places.

It would be like whistling in the dark.

Yes, 4 units is better than 1. Agent Orange also hit the nail on the head - parking minimums and FAR ALWAYS drive density (not height limits) so those would need to be reformed/removed as well. Many many sites would pencil if the zoning flood gates were to open and construction cost is a transitory issue (our Fed's favorite buzz word) that should eventually reach some sort of equilibrium. It will take time, 2 yeas is about how long it takes to get any project to a state of construction in normal times let alone with a new zoning code and surging inflation, which the construction/development industry has been dealing with for 7-8 years, not just 12 months.

There are an incredible number of well off households (haves vs have nots) all throughout the City of Denver and I can see many of them chasing a 5% return and a nest egg for their families vs keeping cash in the bank losing money at 3-4% each year because of our (transitory) inflation - there I go again with that buzz word. The rent for a trip-four plex will certainly be less than a 5-story apartment unit and a drop in the bucket compared to a high rise apartment. That's what we call housing diversity - it's not that every unit produced is purely affordable or luxury, it's that a range of units are produced that meet the needs of more people (not less). This is where both sides of the pro/anti development spectrum get it wrong. All units are good units because this country has a hell of a diverse economy and population base and we need to check A,B,C, and D on our bubble test to pass the development class.

[laniroj]

Originally Posted by TakeFive

...I'm also assuming we're not looking for energy-totally inefficient clap-trap construction.

For those on this forum not familiar with building codes, we have made enormous progress with energy consumption over the last 10 years. I only have speculation to rely on and I'm certainly not an expert in this field, but I would generally say that buildings today are at least 30% more efficient than they were just 10 years ago. This has come at a steep cost and is definitely a factor in the cost of construction currently, but it's important to understand that even the cheap looking stuff that gets slapped up is still light years ahead of every other building that came before it from a consumption standpoint (including raw materials).

[laniroj]

*removed*

If you really want to crunch data, you could look at US Census data for total households and median income, then overlay that onto total housing units and break it down between renter vs owner units. Applying the median household size to the total population will get you a number of housing units needed overall which will allow you to compare that to the number of existing housing units to determine shortfall (if there is one technically in the data). You could also apply weighted adjustments for something like job growth over the past decade (we need a house for every 3 jobs) and adjust the shortage accordingly.

Or you can just read the Harvard Joint Center for Housing Studies annual report as ** suggests.

[TakeFive]

Yes, History is a very good Explainer

Originally Posted by COtoOC

I've wondered if cities like Denver have a housing shortage (and high prices) because they grew too fast. Meaning, home building just couldn't keep up with the pace of population growth for decades, which results in high prices and not enough housing.

Compared to cities that had a more steady population increase over the decades (KC Metro for instance) and home building was better able to keep up with the slower demand.

Going back 30 years the migration and growth patterns have been fairly consistent. The South, the SW and the West have experienced tremendous growth. Then there's the more granular...

Early but especially the mid-2000's

Home construction was 'out of control' in Inland California, Nevada, Arizona, Florida and ofc Texas. Subsequently, these areas became the most overbuilt (except Texas) as the Great Recession approached.

Earlier in the decade there was the great tech meltdown which wobbled things for a bit of time.

During this time Denver had it's own unique path. Following Denver's Great Recession of 1980's and subsequent recovery the 'tech meltdown' came later to Denver via the communications industry - think cable TV and fiber optics. As a result Denver's home construction was much more conservative going into the Great Recession resulting in little (if any) excess inventory.

The early 2010's

The Wall Street crowd assessed future potential growth and became enamored with urban centers and transit. Arizona, Nevada and Florida were targets for accumulating foreclosures but NOT for NEW construction. After safer investment/construction in key coastal cities, they looked around and found Seattle and Denver (out west). While Denver didn't have the depth of tech that Seattle quickly developed it did have tech and a much more diverse economy than in the past.

Denver's Urban Revolution

A key component of Denver's urban growth and development was the hype around the FasTracks initiative highlighted by the Denver Union Transit Center and overall rail map - whether deserved or not is a different question. In contrast to previous recoveries developers built very little 'entry-level' housing in the suburbs; all the energy was for downtown density.

It's worth reiterating and pointing out that Denver hadn't gotten overbuilt, was an attractive location and city - for investment. And if you think back to 2009-2012, early downtown construction was modest, like in 4 & 5-story buildings. But then the Great Millennial hype and migration made Denver a favorite destination and the momentum just grew and grew.

But let's face it, Urban Construction and Development ain't cheap.

Some cities like Kansas City and Minneapolis come to mind had more moderate growth but a deeper and older stock of housing which is one key to maintaining more affordable housing.

[Agent Orange]

Originally Posted by COtoOC

I've wondered if cities like Denver have a housing shortage (and high prices) because they grew too fast. Meaning, home building just couldn't keep up with the pace of population growth for decades, which results in high prices and not enough housing.

Compared to cities that had a more steady population increase over the decades (KC Metro for instance) and home building was better able to keep up with the slower demand.

So Denver metro grew a bit over 17% this past decade and the same growth rate in the 00s. But in the 90s it was over 30%, so I don't think growth is the only factor. Also metros like Raleigh-Durham, Austin, Las Vegas, even Atlanta in the 90s and 00s grew even faster than that, and yet they didn't become significantly unaffordable.

[Arapahoe]

BREAKING NEWS

Amacon has paid their $1.2 million building permit fee and construction permit has been issued today.

[wong21fr]

Originally Posted by Agent Orange

So Denver metro grew a bit over 17% this past decade and the same growth rate in the 00s. But in the 90s it was over 30%, so I don't think growth is the only factor. Also metros like Raleigh-Durham, Austin, Las Vegas, even Atlanta in the 90s and 00s grew even faster than that, and yet they didn't become significantly unaffordable.

All of these metro's in those pre-2010 time periods were growing and were accommodating most of the growth due to the pace of homebuilding in suburban subdivisions. But suburban subdivision development suffered greatly from the 2008 Financial Crisis and has never recovered due to a multitude of factors (tract homebuilder bankruptcies, less accessible capital, increased mortgage qualifications, etc.). So the US lost a large chunk of it's homebuilding capacity and it wasn't replaced by another mode of development (multifamily, shantytowns, a new frontier, etc.) in-kind.

We lost a significant percentage of new housing capacity and have never gotten it back. Some markets had a good chunk of excess capacity in stalled development and existing stock that had been foreclosed upon while others, such as Denver, didn't have a ton of excess supply to dip into. So the realization of the supply restraints have been disproportionately experienced.

[wong21fr]

Originally Posted by Arapahoe

BREAKING NEWS

Amacon has paid their $1.2 million building permit fee and construction permit has been issued today.

Aww hell yeah doggy.

[Agent Orange]

Originally Posted by wong21fr

All of these metro's in those pre-2010 time periods were growing and were accommodating most of the growth due to the pace of homebuilding in suburban subdivisions. But suburban subdivision development suffered greatly from the 2008 Financial Crisis and has never recovered due to a multitude of factors (tract homebuilder bankruptcies, less accessible capital, increased mortgage qualifications, etc.). So the US lost a large chunk of it's homebuilding capacity and it wasn't replaced by another mode of development (multifamily, shantytowns, a new frontier, etc.) in-kind.

We lost a significant percentage of new housing capacity and have never gotten it back. Some markets had a good chunk of excess capacity in stalled development and existing stock that had been foreclosed upon while others, such as Denver, didn't have a ton of excess supply to dip into. So the realization of the supply restraints have been disproportionately experienced.

That's a very good point. Not only the loss of construction workers/firms post GFC, but it is of course a lot easier to build greenfield, suburban neighborhoods but post 2010 or so, Denver metro growth has had a more brownfield, urban focus than in the past. But those stats do go to show, I think, that if building and permitting were more streamlined in a way that approaches the transparency and simplicity of greenfield development (politically impossible ofc), that growth doesn't have to lead to stark price increases.

I wonder if places like Atlanta and RDU (and the Front Range for that matter) might have grown even faster in the last decade if we had a more resilient, pre-2008 ecosystem of contractors and construction workers. I suspect Americans have become less mobile because fewer and fewer cities (with jobs) are true bargains anymore.

[bunt_q]

Originally Posted by wong21fr

and it wasn't replaced by another mode of development (multifamily, shantytowns, a new frontier, etc.) in-kind

I disagree. We have greatly increased our supply of shantytowns, especially since 2020.

[wong21fr]

Originally Posted by bunt_q

I disagree. We have greatly increased our supply of shantytowns, especially since 2020.

But nowhere near the degree or the location needed. A shantytown of 4,000 to 5,000 out near DIA on the north side.... problem solved.

[TakeFive]

Hell Ya I agree - sort of

Originally Posted by laniroj

Many many sites would pencil if the zoning flood gates were to open and construction cost is a transitory issue (our Fed's favorite buzz word) that should eventually reach some sort of equilibrium. It will take time, 2 yeas is about how long it takes to get any project to a state of construction in normal times let alone with a new zoning code and surging inflation, which the construction/development industry has been dealing with for 7-8 years, not just 12 months.

We might want to expand on bunt's "On Paper" reference and if you want to take notes grab a pencil and some paper.




All of Denver is now zoned for up to four units on previously zoned single family lots/sites

Now would be a good time to sharpen your pencil.

To understand the WHOLE of Denver is to know the canvas of geography, demographics and history for all parts of Denver - of course.

Take Westwood, for example; nobody is falling over themselves to build in Westwood and that's a good thing as the people that live their need their lower housing costs. They like where they live and they like their neighborhood. It's their HOME after all.

So I learned today how you can expand an image on your smartphone by using your fingers, right? Let's expand the image to all of SW Denver. SW Denver looks like the best opportunity out there to me.

While I'm not specifically as familiar with SW Denver as other areas, the housing is all essentially the same given the period for when those homes were built. It seems totally logical given that land costs in SW Denver might be one-third (or even less) of what they are in more desirable Denver neighborhoods that builders might just rush in to take advantage of the much lower costs to build fourplexes.

Additionally, each area of Denver would have its own cost profile for building fourplexes and where it's much cheaper to build would likely generate the most activity. The more desirable areas would be popular but more challenging. Any viable sites would ofc go to the highest bidder. It would take patience and financial ability to make these opportunities work.

Quick Story

Yesterday, I'm driving around parts of Scottsdale, especially the more mature areas to better know my way around. Drove through several beautiful, beautiful areas. Not unlike central Denver the landscapes are so mature with trees, bushes etc. Everywhere I drove I couldn't miss the number of landscape workers out doing their job and this time of year is really pretty. These guys obviously don't make tech money but they are good jobs and many landscapers do manage to buy their own homes or afford a nicer apartment.

[TakeFive]

Originally Posted by Arapahoe

BREAKING NEWS

Amacon has paid their $1.2 million building permit fee and construction permit has been issued today.

I don't crack open a vintage bottle of wine until I see shovels in the ground.

But hot damn, this is sweet prologue music.

Originally Posted by wong21fr

But suburban subdivision development suffered greatly from the 2008 Financial Crisis and has never recovered due to a multitude of factors (tract homebuilder bankruptcies, less accessible capital, increased mortgage qualifications, etc.). So the US lost a large chunk of it's homebuilding capacity and it wasn't replaced by another mode of development (multifamily, shantytowns, a new frontier, etc.) in-kind.

True, initially lenders and builders were quite conservative coming out of the recession and as you point out due to stricter qualifications initial construction was largely upscale which hurt affordability. But many areas had excess inventories so it wasn't an issue early on. And over time those areas where suburban growth is popular, they have seen a resurgence in all types of home construction.

[TakeFive]

Music to twister244's ears

A quarter of Denver homebuyers are looking to relocate out of the metro
Dec 1, 2021 By Ethan Nelson – Data Reporter, Denver Business Journal

Around one in four Denver homebuyers are looking to relocate, and the top potential destination is Chicago, according to new research from Seattle-based real estate firm Redfin.

What's going on?

The itch to get out of dodge among Denver homebuyers is a result of the shakeup the pandemic brought to commuting and remote work, according to the report released Monday.

Sunnier locales – Miami, Phoenix, Sacramento and Las Vegas – are the country’s homebuyers’ top pick for potential relocation, according to the report.

Any negatives with respect to Denver?

Cities with high costs of living are seeing the most interest in net homebuyer outflow. Redfin cited San Francisco, Los Angeles and New York as cities with homebuyers most interested in relocating elsewhere. Denver homebuyers come in at No. 8 in the nation in terms of outflow, behind Chicago, Boston and Seattle.

But there's always a "However"

“Popular Sunbelt migration destinations including Phoenix, Atlanta and Austin will probably fall out of favor as skyrocketing home prices have rendered them less affordable,” Fairweather said.

Growing crime is also a consideration.

[Arapahoe]

Originally Posted by TakeFive

I don't crack open a vintage bottle of wine until I see shovels in the ground.

But hot damn, this is sweet prologue music.

Denver construction permits are subject to cancellation if work is not started within 60 days so I imagine Amacon has their ducks in a row to throw down $1.2 million for that piece of paper.

but yeah, shovels in the ground stat!

[SirLucasTheGreat]

Great news on Amacon. I drove by that site tonight and saw a couple of pickup trucks parked on it. Perhaps we might see groundbreaking soon.

Also, the former building where the new 14th and Court Hotel will be was just demolished within the past few days. In addition, the Evans West and Modera Golden Triangle sites are active although the former RMPBS building hasn't been fully demolished yet.

[Arapahoe]

Originally Posted by TakeFive

Music to twister244's ears

A quarter of Denver homebuyers are looking to relocate out of the metro

what a click-bait headline... lol, that should your first red flag. I looked at their report to see the data source.

The data behind these stats are a sampling of people who happen to use redfin.com for home searches; not actual home sales, and not relocation stats.

Of course media will pick it up as a very lazy way to get traffic and excite the gullible.

Redfin.com probably represents a small fraction of Denver home buyers, and of this unscientific sample, 25% looked at homes in different locales. Big whoop... who didn't browse home locations during the pandemic? I did.

Meanwhile in the real world of 2021, 75% of Denver homes sell in under 7 days, and 91% in under a month.

[TakeFive]

I really appreciate the knowledge you bring to this site

Originally Posted by Arapahoe

Denver construction permits are subject to cancellation if work is not started within 60 days so I imagine Amacon has their ducks in a row to throw down $1.2 million for that piece of paper.

but yeah, shovels in the ground stat!

BTW, I've lost much of my 'work-around' access to DBJ, especially CRE articles (others I can still access - I have no idea...) so you and others will have to pitch in with the hot news from the DBJ.


It's no biggie but:



I've made a two-year commitment (to myself) to do rideshare. Fortunately, I vey much enjoy getting out and meeting all kinds of people - from all over the country and the world. When I turn 76 if COVID hasn't taken me then I'll decide anew what my priorities are. In the meantime I'll at best be a part time contributor. I do hope to find some time to watch the Nuggets and Avalanche though.

----------------------
It turns out we aren't the only concerned citizens

RTD union calls Denver Union Station a ‘lawless hellhole’
Dec 1, 2021 by: Morgan Whitley - KDVR

DENVER (KDVR) — The union that represents RTD and First Transit, RTD’s largest fixed-route contractor, is alerting the community of unsafe and unhealthy conditions. The Problem Solvers obtained video of firsthand accounts of illicit drug use at Union Station.

Union Station is a staple of downtown Denver transportation and services shuttle buses, light rails and commuter and Amtrak trains. According to the union, in recent months RTD passengers and employees have faced loiterers, encampments and illegal drug use while boarding buses, trains and light rail.

What do RTD operators say?

“I had another operator tell me that she considers it a great day when nobody is seen smoking methamphetamine or using heroin on her bus,” Logenbohn said.

The union urges more to be done for the safety of RTD passengers and employers. “RTD passengers deserve better. The public that likes to enjoy lower downtown deserves better,” Longenbohn said.

--------------------------

Originally Posted by Arapahoe

what a click-bait headline... lol, that should your first red flag. I looked at their report to see the data source.

I admit I thought the click-bait might be fun food for thought. But (you know) how unimpressed I generally am with statistics so Point Well Made.

[coolmandan03]

Originally Posted by TakeFive

BTW, I've lost much of my 'work-around' access to DBJ, especially CRE articles (others I can still access - I have no idea...)

Using Firefox, there's a Bypass Paywalls extension. Works great!

[twister244]

Originally Posted by Arapahoe

what a click-bait headline... lol, that should your first red flag. I looked at their report to see the data source.

The data behind these stats are a sampling of people who happen to use redfin.com for home searches; not actual home sales, and not relocation stats.

Of course media will pick it up as a very lazy way to get traffic and excite the gullible.

Redfin.com probably represents a small fraction of Denver home buyers, and of this unscientific sample, 25% looked at homes in different locales. Big whoop... who didn't browse home locations during the pandemic? I did.

Meanwhile in the real world of 2021, 75% of Denver homes sell in under 7 days, and 91% in under a month.

Yeah, obviously it's meant to get clicks.

However...... I could see why some people are actually moving out of Denver for other parts of the country. Simply put, Denver has gotten ungodly expensive. For me, the tipping point was last year during the pandemic. Once I knew I could work remotely long term, I did a lot of reflection on whether or not I wanted to stay in Colorado. Then prices went up, and Chicago's prices have stayed relatively low. The other thing I experienced is several people I met in the five years I was in Denver have also left. It's a pretty transient city for millennials, unless they settle down out in the burbs with kids.

I just got back from a few months over in Europe (just in time for Omicron) and am thinking about getting a condo here while continuing to rent my place out in Denver. Maybe after a couple years I will cash out for a bigger place here. You gotta remember, most major cities in the country have experienced major real estate rises over the last decade. The coastal cities were always more, but now they are insane. And those other hip millennial destinations (Austin, Nashville)? They have started getting expensive now too. Chicago though? Even with higher property taxes, it's increasingly looking like a bargain.

At the end of a day, people are starting to look at whether Denver is worth the $600-$700k price of admission when there are other parts of the country where they may get more bang for their buck.

Also - Per the Union Station post, that 🞵🞵🞵🞵 needs to end now. That's a major public project that should stay pristine. The city should not allow a bunch of shitheads to sit around and shoot up like it's San Francisco.